Cost of Sales for FQ3 was $14 million or 56.2% of sales as compared to $7.5 million or 47.2% of sales a year earlier. Our cost of sales consists of the raw material cost, labor, depreciation and amortization of manufacturing equipment and facilities and other overhead.
Gross Margin for FQ3 was 43.6% as compared to 52.8% for the quarter ended March 31 st 2010. The decrease in gross margin was attributable to the average 15% TMT distribution revenue. In addition, the pricing pressure on our generic product also leads to the gross margin reduction.
During this quarter our 56 product organic portfolio delivered approximately 51.4% gross margin, about 1.4% lower than the gross margin of 52.8% from a year earlier.
Given these trends we anticipate that our overall gross margin in the near term on a quarter to quarter comparison base may trend lower but on a sequential basis should stabilize and improve depending upon the revenue mix percentage of TMT revenue, upcoming JCM macrolide API revenue as compared to the proprietary portfolio's revenue performance.Operating Expenses for FQ3 were $5.8 million compared with $4.8 million for the quarter ended March 31 st 2010. Continuing sales payroll and marketing expenses are the main components of the operating expenses. Net Income was $3.7 million for the quarter ended March 31 st 2011 as compared to net income of $2.9 million for FQ3 2010, a net increase of $.8 million or 27.6% year over year. Net profit margins for the quarter ended March 31 st 2011 decreased to 14.9% from 18.3% for the quarter ended March 31 st 2010 mainly attributable to one; recent pricing pressure on the generic pharmaceutical business, two; lower margin TMT distribution revenue, three; increase of income tax provision to 25% starting January 2011 from the previous 15% for Chengdu Tianyin on the expiration of the three year tax benefit for high tech enterprise. We expect the stabilization of the net profit margin at approximately 15% going forward under the current condition. Read the rest of this transcript for free on seekingalpha.com
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